Charlie Lee vision for SegWit And Lightning Networks On Litecoin And Bitcoin

A Great Article from Charlie Lee CEO of Litecoin. Full article you can find in this link: LINK
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You’ve probably seen that I recently started advocating for SegWit to activate on Litecoin and Bitcoin. I wasn’t doing any of this before because it would be wasted energy when the code was not finished. But now that the release candidate code is tagged and binaries close to release, I figure it’s time for me to start making some noise.

So you may wonder why I’m pushing for SegWit. Litecoin does not have a block size problem. That’s right, and SegWit is not just a block scaling solution. I would even say block scaling is just a side benefit of SegWit. The main fix is transaction malleability, which would allow Lightning Networks (LN) to be built on top of Litecoin. And there are a bunch more nice features of SegWit.

But some people say LN on Bitcoin will kill any reason to use Litecoin. If people can do instantaneous transactions on Bitcoin, why would they use Litecoin? My gut feel is that this is not the case. Even with LN, Bitcoin still cannot service every person in the world. I think the calculation was that at 1MB blocks, LN and SegWit on Bitcoin can service 500M users. LN nodes will charge a fee for LN txns going through them and that fee will be relative to the Bitcoin network fee. So Bitcoin LN txns will be more expensive than Litecoin LN txns. It may make economic sense for a LN txn to go via Litecoin and back to Bitcoin to get the cheapest rate. Lightning makes this possible because it allows the two LN to be interoperable. I don’t know that this use case will be economical or not, but we won’t know until both LNs are built and running.

Think of it being two highways: Today, Bitcoin is packed full of cars and Litecoin is empty. Even with Bitcoin packed, the cars are not coming to use the Litecoin highway today because it’s not connected and it’s inconvenient (centralized exchanges and slow on-chain transfers) to go across. LN will build bridges over the highways. But a side benefit is that these bridges will connect both highways together. Maybe the bridges on Bitcoin are enough such that cars will still stay on the Bitcoin highway. My bet is that the convenience and the cheaper tolls on Litecoin highway will convince cars to cross over and use Litecoin. But we won’t know until both are built.

Another benefit is atomic cross-chain transactions via LN. Two users can trade BTC and LTC instantaneous and without risk. Efficient decentralized exchanges are now possible. Or what if a merchant accepts only BTC but you only have LTC. You can now pay LTC and exchange them instantly through a LN exchange node and send BTC to the merchant. That’s basically decentralized ShapeShift. One last thing I thought of recently is the ability to balance lopsided payment channels on both lightning networks. There are probably millions of other cool things that SegWit and LN open up that we have yet scratched the surface of.

Until SegWit, LN, and Confidential Transactions, I didn’t see a need for Litecoin to come out to help test features before they are on Bitcoin. So I was happy to let Litecoin go on without a lot of development. Hence my tweet about Litecoin not needing development. But with SegWit and Bitcoin’s current block scaling deadlock, I see a potential for Litecoin to help Bitcoin break through this deadlock. Litecoin can take a lead and be a positive force in the cryptocurrency space. We have been drafting behind the Bitcoin race car for many years. It’s about time to take a turn out front.